Authored by: Attorney Taejin Kim,
K&P Law Firm, Songdo, Incheon
I. Summary
In the event that an employer uncovers an act of misconduct by an employee who has applied for honorary retirement shortly before their intended retirement date, what steps should they take? Upon such a discovery, the employer should subject the retirement applicant to disciplinary proceedings and place them on hold. The employer must then carry out disciplinary action swiftly yet in adherence to the pertinent regulations.
Even if the disciplinary action occurs after the projected retirement date of the applicant, it remains legally valid.
II. Case Details
(Reference Case: Seoul High Court, September 16, 2022, judgment 2022na2001631)
This discussion is based on the referenced case.
Insurance company X implemented a wage peak system, and subsequently introduced the 'Temporary Compensation Retirement System for Wage Peak Applicants' (hereinafter referred to as the 'Retirement System') for employees under this system from January 1, 2019.
Employees who had served for at least 15 years and were 55 years old or older could choose to retire early rather than working up to the age of 60. In such cases, the company would provide a lump-sum compensation and other benefits, offer a period for self-development education to plan for a second career until their retirement date, and also subsidize educational expenses up to a limit of 300,000 won per month.
Employee A, who had served Company X for over 15 years and was 55 years old, applied for retirement under this system on January 1, 2023, choosing February 28, 2023, as his retirement date. As part of the benefits for honorary retirees, Company X funded A's educational expenses for intermediate English conversation and housing manager courses.
However, after A's retirement application, Company X carried out an investigation into allegations that A attempted to poach employees from Company X while preparing to open an insurance agency at a rival company, Insurance Company Y. On February 10, 2023, Company X subjected A to disciplinary proceedings and placed him on hold.
Subsequently, on March 15, 2023, Company X's personnel committee decided to dismiss A for reasons including employee poaching, violation of the prohibition on holding dual positions, and removal of information assets and personal data during his tenure. Company X did not pay him the wage peak compensation.
In response, A contended that:
1) Company X's disciplinary dismissal was invalid as it was directed at a person who had already retired, given that the scheduled retirement date (February 28, 2023) had passed at the time of the dismissal (March 15, 2023).
2) Since the scheduled retirement date of February 28, 2023, had passed, A had effectively left Company X, and thus, the company was obliged to pay the wage peak lump-sum compensation.
III. Court Ruling
1. Did Company X accept A's retirement application?
Voluntary or honorary retirement only takes effect when an employee applies for it and the company approves it. In this case, as Company X funded educational expenses for honorary retirees, it can be inferred that the company tacitly approved A's retirement application.
2. Can Company X retract its approval of the retirement?
Honorary retirement marks a mutual termination of the employment relationship, which comes into effect once an employee applies for honorary retirement and the employer approves it after considering the requirements. Once this agreement has been reached, neither party can unilaterally withdraw its consent. Upon the arrival of the scheduled retirement date as per the agreement, the employee is naturally retired, and the employer is obligated to pay an honorarium. However, if the employee commits a serious misconduct that impedes the continuation of the employment relationship before the scheduled retirement date, the employer may retract their approval of the honorary retirement (Supreme Court, August 23, 2002, judgment 2000 Da 60890, 60906, etc.).
If the employee, despite being found guilty of serious misconduct and put on hold, proceeds to retire on the original retirement date, the disciplinary authority is faced with a choice: to either proceed with disciplinary proceedings against an employee who is about to retire or to fulfill the obligation of retirement without conducting any disciplinary proceedings (in this case, to pay the temporary compensation). The former may increase the chance of the disciplinary action being invalidated due to procedural flaws, while the latter may unfairly restrict the disciplinary authority's right to discipline.
Hence, if the employee's serious misconduct is confirmed, the employer may retract their approval of the retirement application. In this case, Company X put A on "standby for referral to disciplinary proceedings" on February 10, 2023, which effectively postponed A's scheduled retirement date (February 28, 2023). It is reasonable to conclude that it retracted its approval of the retirement application by dismissing him on March 15, 2023.
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